Question

Montoure Company uses a perpetual inventory system. It entered into the following calendar-year purchases and sales transactions. (For specific identification, units sold consist of 600 units from beginning inventory, 300 from the February 10 purchase, 200 from the March 13 purchase, 50 from the August 21 purchase, and 250 from the September 5 purchase.) Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 600 units @ $45.00 per unit Feb. 10 Purchase 400 units @ $42.00 per unit Mar. 13 Purchase 200 units @ $27.00 per unit Mar. 15 Sales 800 units @ $75.00 per unit Aug. 21 Purchase 100 units @ $50.00 per unit Sept. 5 Purchase 500 units @ $46.00 per unit Sept. 10 Sales 600 units @ $75.00 per unit Totals 1,800 units 1,400 units Required 1.Compute cost of goods available for sale and the number of units available for sale. 2.Compute the number of units in ending inventory. 3.Compute the cost assigned to ending inventory using (a) FIFO, (b) LIFO, (c) weighted average, and (d) specific identification. (Round all amounts to cents.) Check (3) Ending inventory: FIFO, $18,400; LIFO, $18,000; WA, $17,760 4.Compute gross profit earned by the company for each of the four costing methods in part 3. (4) LIFO gross profit, $45,800

Answer 1

• All working forms part of the answer
• Opening Inventory 600 units @ $45 = $27000
• Purchases working

Purchase	Units	Rate	Amount
Feb-10	400	42	16800
Mar-13	200	27	5400
Aug-21	100	50	5000
Sep-05	500	46	23000
Total	1200		50200

• Sales Working

Sales	Units	Rate	Amount
Mar-15	800	75	60000
Sep-10	600	75	45000
			0
Total	1400		105000

• Requirement 1: Cost of Goods Available for sale

Cost of Goods Available for Sale = Opening Inventory + Purchases
= 27000 + 50200 = $77,200

• Requirement 2: No. of Units in Ending Inventory

Closing Inventory = Opening Inventory + Purchased units - Sold Units
= 600 + 1200 – 1400 = 400 units

• Requirement 3: Cost assigned to Ending Inventory using various methods

First, FIFO

FIFO	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening Jan 1	600	45.00	27000				600	45.00	27000.00
Feb 10 Purchase	400	42.00	16800				600	45.00	27000.00
							400	42.00	16800.00
Mar 13 Purchase	200	27.00	5400				600	45.00	27000.00
							400	42.00	16800.00
							200	27.00	5400.00
Mar 15 Sales				600	45.00	27000	200	42.00	8400.00
				200	42.00	8400	200	27.00	5400.00
Aug 21 purchased	100	50.00	5000				200	42.00	8400.00
							200	27.00	5400.00
							100	50.00	5000.00
Sept 5 Purchase	500	46.00	23000				200	42.00	8400.00
							200	27.00	5400.00
							100	50.00	5000.00
							500	46.00	23000.00
Sep 10 Sales				200	42.00	8400	400	46.00	18400.00
				200	27.00	5400
				100	50.00	5000
				100	46.00	4600
TOTAL	1800		77200	1400		58800	400		18400.00
	Units	Value
Cost of Goods Sold	1400	58800
Closing Inventory	400	18400

LIFO Method

LIFO	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening Jan 1	600	45.00	27000				600	45.00	27000.00
Feb 10 Purchase	400	42.00	16800				600	45.00	27000.00
							400	42.00	16800.00
Mar 13 Purchase	200	27.00	5400				600	45.00	27000.00
							400	42.00	16800.00
							200	27.00	5400.00
Mar 15 Sales				200	27.00	5400	400	45.00	18000.00
				400	42.00	16800			0.00
				200	45.00	9000
Aug 21 purchased	100	50.00	5000				400	45.00	18000.00
							100	50.00	5000.00
									0.00
Sept 5 Purchase	500	46.00	23000				400	45.00	18000.00
							100	50.00	5000.00
							500	46.00	23000.00
Sep 10 Sales				500	46.00	23000	400	45.00	18000.00
				100	50.00	5000
TOTAL	1800		77200.00	1400		59200.00	400		18000.00
	Units	Value
Cost of Goods Sold	1400	59200
Closing Inventory	400	18000

Weighted Average

Moving Average cost	Opening + Purchases			Cost of Goods Sold			Closing Inventory
Opening Jan 1	600	45.00	27000				600	45.00	27000.00
Feb 10 Purchase	400	42	16800				1000	43.80	43800.00
Mar 13 Purchase	200	27.00	5400			0.00	1200	41.00	49200.00
Mar 15 Sales				800	41.00	32800.00	400	41.00	16400.00
Aug 21 purchased	100	50.00	5000				500	42.80	21400.00
Sept 5 Purchase	500	46	23000				1000	44.40	44400.00
Sep 10 Sales				600	44.40	26640.00	400	44.40	17760.00
TOTAL	1800		77200.00	1400		59440.00	400		17760.00

Specific Identification Method

Specific Identification	Cost of Goods available for sale			Cost of Goods Sold			Endging Inventory
	Units	Cost/unit	COG for sale	Units sold	Cost/unit	COGS	Units	Cost/unit	Ending inventory
Beginning Inventory	600	45	27000	600	45	27000	0	45	0
Purchases:
Feb-10	400	42	16800	300	42	12600	100	42	4200
Mar-13	200	27	5400	200	27	5400	0	27	0
Aug-21	100	50	5000	50	50	2500	50	50	2500
Sep-05	500	46	23000	250	46	11500	250	46	11500
TOTAL	1800		77200	1400		59000	400		18200

• Requirement 4: Gross Profit = Sales – Cost of Goods Sold

	FIFO	LIFO	WA	Specific Identification
Sales	105000	105000	105000	105000
Cost of Goods Sold as calculated above	58800	59200	59440	59000
Gross Profit	46200	45800	45560	46000